If you missed the webinar with ZIPZERO's co-founders, Mohsin Rashid and Marcin Walaszczyk, we’ve summarised some vital information about ZIPZERO in a Q&A session.
ZIPZERO: ASDA has a lot of internal systems, which will give it a huge amount of information on what customers buy at ASDA. Our value proposition is that we can tell ASDA what its customers are buying from its competitors. We could tell ASDA what an ASDA customer is buying from LIDL, from Tesco, from Amazon, from any other retailer.
ZIPZERO: Snowflake is basically the world's largest data marketplaces. Snowflake enables us to effectively 1) warehouse our data, and 2) reach a wide variety of commercial partners to monetise that data.
So all the large data buyers in the world buy data from Snowflake. Companies like Experian, Sainsbury, like global data. They all buy data from Snowflake. The partnership with Snowflake is a huge validation of what we are doing. The fact that we've been selected to be part of their startup program is exciting for us, but it's a huge tick in the box in the fact that we are doing something very unique and exciting with data.
ZIPZERO: No, because we are collecting data from people on a consenting first-party data basis. Our users are willingly sharing their data with us. ZIPZERO is consent based, so we are not scraping data from your inbox and secretly having you sign up for some hidden terms and conditions. We believe that increasing privacy regulation and scrutiny will be hugely positive for our business because we are doing things in a very different and unique way.
ZIPZERO: There is no company who does what we do. People often confuse what we do with cashback platforms, but that is an oversimplification of what we are.
We are a data business. Cashback platforms simply make money from collecting commissions from your transactions. For us, that is one small piece of our commercial strategy. Ultimately, the value for us is in the consumer data and the monetisation of that data and the unique way we can work with brands and retailers to harness the power of that data.
ZIPZERO: Because we are a real platform business, we see real economies of scale and commercial leverage as we start to grow our user base. In simple terms, we make money from a user in three ways:
So for us, there is a real flywheel effect around how the economics of this business ramp up as a user-based growth. Ultimately we believe that in the medium term we can start generating close to £60 of revenue per user at a 30% gross margin.
ZIPZERO: Since the last time we shared our statistics, we have gone up to 150,000 users, which I think is fantastic progress given that we have only been live a year. To date, our focus really hasn't been on accelerating that user base but more on increasing engagement with the existing user base. To date, we have collected data from 3 million receipts. An average user will share 20 receipts per month and every day, we collect data from all 20,000 receipts.
We are willing to start huge growth and, and acceleration in the volume of data we collect. In terms of growth for the user base we have a very specific strategy. I want to go back to our consumer value proposition and the bill payments. Because we help people pay their bills, we are negotiating partnerships with all those bill companies like EDF, EE, Sky. We want to put in place marketing partnerships with those businesses where they market us to their user base.
We are giving their customers access to a source of money they wouldn't otherwise have, which goes directly towards the payment of those bills. The first partnership will be with EDF, who we have an agreement with, and expect to go live with them as soon as we are ready.
ZIPZERO: The problem with defining our total addressable market (TAM) is that the global data market is huge. We could measure that in trillions if you think of how big data businesses in the world are, but, for us, TAM is not a simple question because we have so many touch points we cover.
It is not as simple as calculating the number of retailers in the UK multiplied by the X million spent on data, because our market is beyond retailers and brands. Our market includes companies in market research, in healthcare and research businesses across Europe.
TAM is quite a restrictive way of thinking about the commercial aspects of our business because we are not focused on one particular niche that we can easily ring fence and define and is quite restrictive of how we think commercially and strategically about future opportunities.
ZIPZERO: The reason is very simple and we have relied very heavily on our COO and CTO Marcin’s previous experience in the loyalty space and around understanding the psychology of customers. Utility bills for pretty much everyone is a recurring monthly universal burden. If you can show people a way to make a meaningful difference every month to their bills, that is a cause for ongoing stimulation. Because bills are recurring, there's increasing engagement and increasing stimulation. We also believe that it removes the friction in the business, as we make it very easy for users to redeem rewards.
We want to make everything very transparent. The other reason is we do not actually want to be dealing with physical cash deposits because we do not want to be a regulated business, as that imposes a lot of other burdens.
The other reason for the bill payment is also that is what will enable us to work with partners who will accelerate our growth, the mobile phone companies, the utility companies, etc. We thought long and hard in a lot of detail about how to construct this commercial model because of the benefits it gives us. We would not have any of these benefits if we were just letting users take cash out.
ZIPZERO: The majority of the funds, over 60%, will be spent on development of the technology platform. We are a tech business and we are very focused on improving our platform to be able to deliver for us commercially. But that also means that we have to do a lot on the customer engagement front and understanding customer behaviours and the journey. The development of the tech platform for us will be ongoing, as we make improvements to the frontend to make the commercial runway smoother.
The rest of the funds will be split between administrative costs and actually an increasing staffing needs to deal with our growth.
We believe these funds could get us to break even if we wanted to, but we are a young growing business and are very focused on growth. The plan is that these funds will take us through to a proper Series A. We would expect our Series A in 12 months time, which will enable us to start expanding into Europe. Our goal is to get ZIPZERO live in at least two European countries by the end of next year.
ZIPZERO: We have essentially raised cash from high net worth individuals. Our cap table is composed of 80% professionals from investment banking, private equity and venture capital, and 20% entrepreneurs.
In this round, we have a couple of very large FinTech investors. One investor is Craig Dewar, who is a serial FinTech entrepreneur that has a very big business in the payment space, which has private equity backing. We also have another European FinTech investor who has also contributed significantly to this round.
We try to choose investors based on not only their money, but also their expertise and strategic value they can add to this business. Because that in some ways is almost more important to an early-stage business like ours is who can help you knock on the doors and the big boys.
ZIPZERO: As entrepreneurs, we always have one eye on exit. Because our business touches so many different industry points and we are at the intersection of where the data strategies of a lot of these businesses come into place, I think we will start coming onto the radar of businesses in about 12 months time.
An exit can come from a buyout of businesses like Experian and Global Data because they are big billion dollar businesses who have a track record of buying out businesses. There are some businesses like S4 Capital, which is Sir Martin Sorrell’s vehicle, which was essentially created to roll up data businesses in and around the marketing and ad tech space. Within 2 to 3 years, we believe we will start seeing some quite aggressive inquiries from businesses. Beyond that, I think we will be of the size and scale and financial profile that will be very interesting to private equity investors.
Ultimately if we want to, we could have the option of doing an IPO, but I would see that as being kind of further down the track, something like 5 years plus. I think certainly within a 3 to 5 year time horizon, we will have a lot of options and flexibility around exit if we want them.
The other thing I would say is that our plan is to do future rounds of venture funding. A lot of institutional investors are quite keen to clean up the cap table, which will create an opportunity in the intervening period for early stage investors to potentially cash out.
ZIPZERO: In terms of AI, we already use machine learning for cleaning data, checks, etc. Right now, we are actually working on adding AI capabilities for additional services like building in-app automation for communication with users, not just in terms of customer service, but making sure that we can engage users more.
We give them on the back of our data, giving them the laser target to offer Snowflake to our capabilities and building this warehouse gives us capabilities to build models on. For example, for medical purposes, we can actually build a lot of AI models to find out and make progress about users’ medical conditions.
ZIPZERO: No, it is a fully automated process. We are very focused on the consumer experience because that is at the heart of our business. One real strategic priority in the first half of this year has been delivering more content to our users. And by more content, we mean more offers with retailers, more partnerships, better rewards, better payment terms.
We have a dedicated team which is solely responsible for one onboarding partnership. By the end of this first half of the year, we will have significantly more in-store partnerships live. In addition to that, we are constantly working to improve our cashback rates. I think we are now competitive with, if not better, than all of the other cashback sites in the uk.
So that has been a real focus for us. Everything in terms of receipt, recognition, processing, everything is automated.
What we are currently focusing on now is a lot of work around the customer engagement aspect: how to better map customer journeys, how to more effectively target customers, and really focus on driving more engagement now that we have more content to manage.
We think of ourselves very much as a customer first business.
ZIPZERO: Our primary strategy is partnerships with the service providers which we believe will deal with 95% of our customer acquisition needs. Because we like to be conservative, we have allocated a very discretionary marketing spend of £5 per user. That is a small discretionary amount that we may not have to spend, but we put it into a business plan for the sake of conservatism.
This takes us back to the earlier question around why we don’t let users withdraw cash. We do not let users cash out because then we would not have access to these companies who can help us grow. One of the problems early stage businesses have is they spend a lot of money acquiring customers. From day one, we have been very conscious about the fact that we need to mitigate that and we need a smarter strategy around that.
ZIPZERO: No, not at this time. One thing we are considering is putting together an advisory board. Currently, we have an informal advisory board made up of some of our investors and advisors on our cap table. We would like to make that a little bit more formal.
In terms of management capability, we hired a very good Head of Partnerships at the end of last year with a career in retail and loyalty. He used to run loyalty in the affiliate programs for companies that run shopping centres like Westfield. He has been a great addition to the team. In a year's time we will think about adding a full-time CFO as a member of the executive team.
For the time being, we are adequately staffed for our stage of growth and development.
ZIPZERO: First, ZIPZERO has a very compelling consumer proposition for everyday users, which is basically free rewards towards bills. The important thing about our platform is because we have at least a base reward level for everything, we are not asking users to change their behaviour in any way. We basically cover all the retailers that you shop at, we can give users money back on in-app purchases, holiday flights, weekly grocery shopping.
In terms of customer acquisition, let me walk through what something like the partnership with EDF will look like.
We are currently exploring the GDPR regulations around it, but users will receive communication from EDF either electronically or through social media introducing ZIPZERO to users and explaining that ZIPZERO lets users earn X amount of money to pay towards bills. We are exploring similar programs with other service providers. The strength of our consumer value proposition is demonstrated by the fact that even in our early days, we have had very strong customer engagement with very little churn.
Our target demographic is every household in the UK. There are 29 million households in the UK that use the essential services. Because of the overlap of services, we don't need to partner with every service provider. We just need to essentially partner with a handful of these businesses to get access to that 29 million demographic and then it's a question of penetration.
ZIPZERO: We accept digital receipts as well as paper receipts. Users can forward digital receipts or online order confirmations to their unique ZIPZERO email address. Our hope is that over time people will use that as their default online shopping email address and we will receive receipts automatically.
ZIPZERO: We have a very deliberate strategic roadmap around our development and growth. Phase one was launching a demonstrated consumer value proposition. Phase two was about consolidation, which involved a big tech update before Christmas, which enabled us now to start offering in-store partnerships.
I want us to be in a position where we are able to give our users as much content as possible, and then we can make another push for growth. To date, we have focused more on execution than marketing ourselves. We have not been in growth mode and that's why I'm extremely confident about our ability to grow because we have gone from 0 to 150,000 users with little marketing effort.
ZIPZERO: We are looking at a series A in around 12 months time. I think we will start preparing for that probably in Q1 with a view to launching in Q2. Our goal is to be in two European countries by the end of next year, which will involve raising some capital through a Series A round.
ZIPZERO, Mohsin: I was very lucky that I was at the SoftBank Vision Fund almost from day one. I was employee #3 or #4 when the fund was set up and all the way through to becoming a global 350-person organisation.
Headline investments I have made include:
I am obviously fortunate in my time there to have had exposure to a huge number of very high profile founders, to spend time with people like Travis Kalanick of Uber. It was a fantastic environment to be exposed to these people and have the opportunity to learn from how some of these huge global businesses started off and scaled successfully.
ZIPZERO, Mohsin: A lot of the credit for the early gestation of this business has to go to Marcin. A lot of this business is based on his prior experience as an entrepreneur and his success with his previous business and what he learned.
We have leaned very heavily on him as a partner and he's been integral not only to the gestation of this business, but actually making this business function. What I (Mohsin) am able to add is the commercial layer on top of his technical capabilities. We make a very good partnership. I make promises to people and he delivers on them.
ZIPZERO, Marcin: We built Freebee, which at the time was one of the largest loyalty programmes at the time with 6 million households. Vodafone Poland invested in us mainly because of our tech. The Freebee platform allowed small businesses to step in and build their own loyalty programmes and share their user base amongst themselves on a single app to do this.
On the back of this, Vodafone decided they want to invest. We built this program and at some point the program was so large that they decided to take business over.
Mohsin: I think Martin is a little bit underselling what he achieved. Those of you who live in London might be familiar with a new loyalty program launched called Embargo. Embargo essentially allows SMEs to create their own loyalty card and platform. Martin did this over a decade ago in Poland. If any one of you has come across Embargo, that is similar to what Martin built and exited more than 10 years ago.
ZIPZERO, Mohsin: I know Fetch actually very well because it’s a SoftBank-portfolio company and the partner who invested hundreds of millions of dollars in Fetch is a friend of mine.
Fetch is a company in the US that is based around working with brands and retailers to provide data from receipts.
A couple of major distinctions between what we do and Fetch. So Fetch is traditional in the way a lot of loyalty businesses are. They give you points which you can exchange for things like Amazon vouchers. They don't give users hard cash. They also don't have what I believe is unique about our business, which is the ability to help users pay their bills and the ability to put in place those partnerships to drive growth.
Fetch actually spent a lot of money acquiring users. They’ve been a hugely successful business. They now have 17 million active users in the US and I think at their last valuation, they were valued at US$3 billion. I think Fetch is validation for us in terms of our approach to data capture and our approach in terms of the consumer value proposition.
It’s a roadmap to what we can look like as a scaled business. I think we have some unique aspects about our business, which I believe makes us a more compelling proposition for users than Fetch.
ZIPZERO: We are at that tipping point where we will really start to see a huge acceleration in our revenue and financial profile. To date, we have spent a lot of time and money putting in the technological and other building blocks to enable us to actually start aggressive commercialisation of our business. We believe that for this year, our revenue will be around £4 million. Next year we estimate the revenue should be in the region of £30 to £35 million.
We are not yet a profitable business. We are an early stage cash business that is burning cash. As CEO, I do not take a wage and have only put money in the business. I am in it for the long term and am sure that in 3 to 5 years time, I will have no doubts about the fact that I did not take a wage out of this business.
ZIPZERO: The main risk is execution. We as a management team have to deliver. We have done well to get to where we are, but I think we are just setting out our journey. We have laid some very strong foundations for the future growth of the business. I believe we are now at a stage where we have the right commercial structure, the right funding structure, and we have the right support network around us. All that can let us down now is execution.